Greenback gains

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On the program today, what we can learn from the fluctuating dollar.

We'll talk about the tax code.

Sorry.

And then we'll go clubbing.

Kinda.

From American public media.

This is Marketplace.

I'm Kai Rizdahl.

It is Thursday, the 9th day of October.

Good as always to have you along, everybody.

It is rare, indeed, when something, anything happens in this economy that there is only a single reason.

Companies invest, consumers spend, commodities rise or fall for a zillion different reasons.

But it can be instructive, we here believe, to dig a little bit.

into the whys of this economy and the commodity of choice for us today to do that is the US dollar.

It's hovering right around a two-month high right now, which is, well, it's curious because this has otherwise been a tough year for the greenback.

Until this recent rally, it had been falling basically since January.

Marketplace Justin Ho gets us going.

The big reason why the dollar's value has been rising recently compared to other countries' currencies has less to do with the dollar itself and more to do with what's going on with those other countries.

This year has been a turbulent year for other regions.

That's Juan Perez, director of trading at Monex USA.

He He says things have been especially turbulent lately in Japan and France, where there's a whole lot of political turmoil over government spending.

As a result, ultimately, the dollar is experiencing strengthening and advancement because both in Europe and in Japan, the political lack of steadiness is actually affecting more the prospective currencies.

But some of the dollar's recent strengthening also has to do with what's going on here in the U.S., says Jeffrey Roach, chief economist at LPL Financial.

As the Fed is easing up on rates and the economy seems to be holding up on some of the headwinds, we actually might see the domestic economy recover and actually pick up the pace of growth.

And Roach says that hope, combined with lower interest rates, has helped to stop the dollar from falling further.

I think we've identified a floor, and that's certainly providing some stability now for those tracking dollar performance.

But the factors that were pushing the dollar lower earlier in the year haven't exactly gone away.

Those include the the president's hostility to foreign trade, the attacks on Federal Reserve independence, and the likelihood that inflation will pick up again.

Kenneth Kim, senior economist at KPMG, says there are plenty of signs that investors are still nervous about the dollar because many have been piling money into alternative assets.

For example, going to precious metals, gold and silver, which have hit new highs,

as well as Bitcoin.

Kim says the big concern is what happens if higher inflation slows down economic growth.

Foreign investors might want to look elsewhere to park or invest their money if U.S.

economic growth is slowing down.

And that would cause the dollar's value to fall further.

I'm Justin Howe for Marketplace.

Wall Street today,

no thanks.

We'll have the details when we do the numbers.

The Internal Revenue Code exists to raise revenue for the government.

It's right there in the name.

But this being the government we're talking about, it's not quite that simple.

The bits of the tax code that don't raise revenue, the deductions and the tax breaks that are in there, have A, shaped this society and our financial lives, and also B, B, created a monstrously complicated tax system because, as Stacey Vanning Smith reports, we use our tax system for a whole lot of things that have nothing to do with taxes.

In 1962, an orthodontist testified before the IRS about overbites.

His solution?

Clarinet lessons.

This is an excerpt from the IRS bulletin in 1962, which explains the orthodontic logic.

As he considered continued practice with this instrument therapeutic treatment towards a legal translation,

playing the clarinet can help correct your child's overbite.

So the IRS decided to therapy.

Get a note from your doctor, and you can write off clarinet lessons as a medical expense.

A few decades later, there are more than 2,000 credits, write-offs, exceptions, exemptions in the IRS rulebook.

Part of the reason for that?

In the U.S., tax credits are often a vehicle for social policy.

Look, there's nothing inherently bad about using the tax system to achieve a policy goal.

Chai Ching Kwang is executive director of the Tax Law Center at NYU.

She says a lot of these exemptions do really good things.

The Earned Income Tax Credit helps lower-income families.

Other tax breaks, like the one for private jets, maybe not so much.

But added up, these exemptions have big implications for the U.S.

tax system.

That just raises far less revenue, which is generally what you have a tax system for.

This system has big implications for taxpayers too.

In the U.S., we spend an estimated $150 billion on tax prep, advisors, and filing software every year, not to mention more than 7 billion hours.

Much of that time, and much of the U.S.

tax code itself, is devoted to loopholes.

A lot of the most complicated things that companies and filers do are things that they choose to do in order to avoid taxes.

All of this creates a situation that is pretty unique to the U.S.

In most of the world, there is no monumental tax day.

Lawrence Zelinek is a professor of tax law at Duke.

There is no sort of functional equivalent of April 15th, where, you know, everybody

rushing to make sure they file their return on time.

That sounds awesome.

Where did we go wrong?

Where the U.S.

went wrong?

Form 1040, says Elinek.

That would be the IRS form most Americans use to file their taxes.

For example, 1975, Congress introduces the Earned Income Tax Credit, which is basically a wage subsidy for lower wage parents.

And

that could have been set up as the government simply would send low-income working parents checks every month or every year.

In fact, that is how it works in much of the world.

In Austria, Australia, South Korea, France, Japan, the government deposits money in your bank account every month for each kid.

But Congress said, hey, we've already got the IRS.

We've already got tax returns.

And so they created the refundable tax credit.

Well, there's no inherent reason why that has to be done through the tax system.

But Congress decided it was administratively simpler to have the IRS take on that role.

Also politically simpler.

Politicians are way less likely to fight a tax credit than to fight creating another program like food assistance or welfare.

But for millions of people, says Zelinek, Form 1040 works like government aid.

If you are eligible for these refundable tax credits, your tax liability may be substantially less than zero and the government sends you a check.

Form 1040, hardest working tax form on earth.

Also one of the most frustrating.

Zelinek even wrote a book about it.

A book with the bizarre title of Learning to Love Form 1040.

Do you love the 1040?

No, no, I'm still learning myself.

That's why it's not loving 1040.

It's learning to love 1040.

The IRS may need some copies.

Federal cuts have eliminated about 25% of IRS staff.

And the new tax bill that passed this summer includes dozens of additional write-offs and deductions.

Now, there are studies that show playing an instrument can reduce stress.

So, if those IRS workers can get a doctor's note, they might just be able to write off music lessons on their taxes.

In New York, I'm Stacey Bannock-Smith for Marketplace.

We are on day, what is it, nine of the government shutdown, and so far, the most visible impacts have been in the world of commercial aviation, delays and cancellations because of air traffic control, which is coming at an already complicated time for air travel, tariff uncertainty, slumping consumer sentiment, and some international travelers just not traveling here right now.

All of that said, though, Delta Airlines posted solid third quarter results this morning, earnings and revenue both beating expectations.

So in this economy that has been so turbulent for so many, Marketplace's Daniel Ackerman looked into what's keeping Delta going.

Today's story of inequality in the travel industry is brought to you by the letter K.

So there's a macroeconomic term that we're using, which is the K-shaped economy.

Jan Freitag is a travel analyst with CoStar.

He says, right now, most consumers are on the downsloping part of the K, pinching pennies when it comes to travel.

But the upper end of the income strata, the 1%ers, the 0.1%ers, they're out there, they're traveling, they're flying front of the plane.

And so Delta has enlarged the front of their planes to cater to those one percenters, says Richard Abalafia of Aerodynamic Advisory.

They had the good sense to switch to a higher mix of premium cabin products and more of an emphasis on international routes.

That focus on the well-heeled has paid off.

Delta's president said last month their average customer earns well over $100,000 a year, adding, quote, we're at the top end, and that seems to be good, unquote.

Well, what's good for Delta isn't so for the airlines that cater to the rest of us.

Those budget carriers are doing not very well at all, of course, led by the next bankruptcy for Spirit.

Spirit, Frontier, and JetBlue have all struggled to turn to profit as cost-conscious flyers pull back.

That's left some airlines looking to level up their clientele, says Nicholas Owens, an aviation analyst with Morningstar.

Case in point, Southwest.

They're going to start selling premium seats up front and assigned seatings and so forth because they did not have, you know, imagine going to the supermarket and the top two shelves of cereal are empty.

Like they had nothing there for someone to pay more for.

And right now, coaxing those who can to pay more seems to be the key to a successful takeoff in the air travel industry.

I'm Daniel Ackerman for Marketplace.

Tomorrow makes it one week past due for the September jobs report.

Government shutdown means we're not getting data at what looks like it could be a turning point for the American labor market.

Last month, if you remember, we got, and I do need to emphasize this, well, because

we got a completely normal, not politicized, entirely expected annual benchmark revision that showed the Labor Department overestimated the number of jobs this economy added between April of 24 and March of 25 by 911,000.

Sounds like a lot, but again, I'm going to say it, revisions are a normal part of publishing jobs data, and they can give you some insight into where things might be headed.

At his press conference last month, Fetcher J.

Powell mentioned that there has been a, quote, almost predictable overcount of jobs lately, in part because of something called the birth-death model.

Marketplace's Maria Hollenhorst explains.

To be clear here, we're talking about business births and business deaths, and businesses die for all kinds of reasons.

I was tired, you know, I'm 58.

It became exhausting.

The business in question is a cat cafe.

Molly Hutton had one in Buffalo, New York, named after her beloved rescue cat, Buckminster.

Here's this is his painting of him, if I can get it.

Oh, he's gorgeous.

Buckminster's cat cafe opened in 2019 with three employees.

They found homes for more than a thousand cats.

And when Molly's Molly's lease expired this past June, she decided to call it quits.

I was left.

Yeah, I need to close the business because I've got to spend more time with my own cats.

She's got four of them, by the way.

And it's not like Molly called the Bureau of Labor Statistics to officially tell them she had closed.

No, I didn't.

And honestly, I have no idea if I was supposed to or not.

I don't know.

I guess I kind of figured that at the end of the year when my guy does the taxes, like maybe something will happen then what do you know

i looked it up that's basically right you are obligated to inform the irs that your business has closed and eventually the bls will get a full count of business births and deaths from something called the quarterly census of employment and wages or qcew which they use to make an annual adjustment But the more timely monthly numbers are based on a survey of 120,000-ish businesses.

So imagine if Buckminster's Cat Cat Cafe was one of those.

First of all, I love cat cafes.

We have five cats at home.

So, and I've been to them many times with the kids.

Okay, I swear I did not know that when I called him.

Michael Horrigan is president of the Upjohn Institute for Employment Research and worked at the BLS for 33 years.

If the BLS suddenly stopped getting surveys back from Molly, they wouldn't know in real time that her business had closed.

Multiply Molly's by however many firms may die in a given month.

It's too much work to to figure out exactly what happened to every single firm.

Instead, they have to estimate job gains and losses from business openings and closings with this thing called the birth-death model.

And the math there is complicated.

But the concept of it is actually quite simple.

In any given month, on average, the employment from births is approximately equal to the employment from deaths.

On average, when one cat cafe closes, another one opens its doors.

And the jobs created and destroyed cancel each other out.

That is part of the birth-death model, the idea that we ignore deaths in our over-the-month change.

Victoria Batista, when the government is not shut down, is one of the economists at the BLS who works on the birth-death model.

And I had to ask, she's more of a dog person, but back to business.

So business openings and business closings move together during most normal years.

Now,

this breaks down when there are turning points in the economy.

Turning points like the Great Recession or the beginning of the pandemic, when more businesses were closing than opening each month.

At those turning points, the model just doesn't work as well.

They're constantly doing research to see if they can improve the efficacy, the quality of that birth-death model.

Economist Michael Horrigan again.

But the fact is, it tends to underperform when the economy is at or near or going into recession.

For three years in a row now, the BLS has overestimated job creation and had to revise it down.

So I think that one of the things that we need to pay attention to is what does this mean about the overall state of the U.S.

economy and to what extent has it been on a weakening path over the last couple years?

Which gets us back to Chair Powell, saying that the birth-death model was partially to blame for those 911,000 jobs that the BLS overestimated last year's economy by.

In other words, there are probably more businesses closing than opening.

I'm Maria Hollenhorst for Marketplace.

Coming up.

I personally am a member of the YMCA.

That's my social club.

Probably cheaper, too.

First, though, let's do the numbers.

Dow Industrial is down 243 today, 1 half percent, 46,358.

The NASDAQ down 18 points, about a 10th percentile, 23,024.

The S ⁇ P 500 dropped 18 points, 3 tenths percent, 67, and 35.

Dan Ackerman was talking about Delta Airlines.

It climbed 4.3% today.

United Airlines, which reports next week, took off 3.10%.

3.3 tenths rather.

American Airlines, which reports the week after next, descended 1.6 tenths percent.

tesla down seven tenths percent today after the government opened a probe into the automakers self-driving cars bond prices glad you asked they went down yield on the 10 year t-note up 4.14 percent you're listening to marketplace recruitment in finance it can feel transactional driven by numbers not by nuance lacking the personal touch that fuels performance LHH believes it should be more by connecting people to opportunity not just skills to roles.

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This is Marketplace.

I'm Kai Rezdahl.

I mentioned gold yesterday, up 50% for the year, 5-0%.

It was down just a bit today, back under a cool $4,000 an ounce.

Gold, though, is not the only precious metal breaking records.

Silver hit an all-time high today, this close to $50 an ounce, topping a record that's nominal dollars, by the way, not inflation adjusted, but the record was set 45 years ago.

From the marketplace desk of you guys, economic history is interesting, Savannah Peters reports.

The last time silver prices surged this high, brothers Nelson and William Hunt were at the center of the story.

They were heirs to the fortune of a wildcat oil speculator.

And the poster children for the old joke, if you want to make a small fortune in commodities, start with a big fortune.

Craig Perong researches market manipulation at the University of Houston.

He says what started as an attempt to hedge against raging inflation in the late 70s ended in a scheme by the Hunt brothers to corner the silver market.

Why silver and why so much silver and how they thought that they were going to get out of this?

Those are all difficult questions.

Perong says they accumulated one-third of the world's privately held silver supply, mostly with borrowed money.

and bid up the price from $9 an ounce to nearly $50.

The problem with trying to prop up the price of anything is you have to keep buying it.

And when worried regulators set new trading limits, silver prices collapsed.

The brothers lost over a billion dollars.

They couldn't pay their debts.

That sparked a mini financial crisis.

On what came to be known as Silver Thursday in March of 1980, on this Silver Thursday, 45 years later, it's not market manipulation that's driving up the price.

There's no master puppeteer pulling on the strings.

But John C.

Coffey at Columbia University does see parallels in the fear and uncertainty driving speculative bets.

This is a broad shift by people who fear major economic problems, major stock market declines, and see silver as the next best safe haven as they get priced out of gold.

It's really chaotic.

Stephan Gleason, CEO of Money Metals Exchange, is bracing for another price swing in either direction.

Because there's just so much psychological noise around this $50 level.

But at least today, Gleason is seeing a lot more investors buying silver than offloading it.

I'm Savannah Peters for Marketplace.

Wealthy Americans have long frequented private golf or country clubs, social clubs too, in and near the bigger cities in this economy.

That members-only experience is expanding, though, with private social clubs popping up in more mid-sized places.

Think Savannah, Georgia, Lexington, Kentucky, Jacksonville, Florida, as well.

Not so mid-sized, however, are what people pay to be a member.

Think a few thousand dollars for an initiation fee, maybe a couple of more thousand every year for dues.

Kate King wrote about all that in the Wall Street Journal the other day.

Kate, good to have you on.

Thanks for having me.

Let's do a little market research here.

These kinds of clubs in bigger cities have been around for a good long while.

Why now now are they shifting to, or moving to, expanding to, I guess, more mid-sized places in this country?

Sure, I'd say a couple reasons.

The first is that the people who are opening these clubs have often moved to these smaller cities, either from bigger cities like New York or Los Angeles, or the people grew up in these smaller mid-sized cities, went away to bigger cities for a while, experienced the clubs in those larger cities, and then are bringing them back when they move to their home native native cities.

So that's one reason.

The other reason is that there's been a lot of movement since the pandemic.

A lot of people moved out of the big cities, moved to smaller markets.

In many cases, these people have a lot of extra spending money.

And so they are able to join these new social clubs.

Speaking of extra spending money, they ain't cheap, these clubs.

Who are the sort of the target customers when these clubs expand into these cities?

I'd say it's probably people who obviously have a little bit of extra spending money.

You know, the age range isn't set in stone, but I'd say it's probably people in their 30s, up through their 40s, 50s, even 60s, are the bulk of the membership.

And of course, it's people who are a bit more affluent, the high earners in these cities.

Right.

And what do they get for their money?

I confess I've never thought about membership, explored, been into one of these clubs.

What do you get?

Sure.

So it's really a social club.

You're joining because you want to socialize with other people, often in a pretty curated environment.

Of course, you're going to be socializing with other people who can pay the same membership fees you can.

The clubs themselves are often in buildings that have there's been a lot of money spent on their renovations, their decor,

and a lot of the socializing is around food and drink.

There's restaurants, which of course are extra costs.

And then there are also all kinds of events.

So maybe it's lecture series, maybe it's flower arranging classes, karaoke nights, DJs.

That's kind of what these clubs offer.

You know, I was having a conversation with a guy the other day, and a longtime observer of the American economy, and he said, what's happening now is the consumers on the top end are driving an increasing share of the spending.

And consumer spending, of course, is important in this economy.

And that's kind of what's happening here, right?

These folks are spending because they got it.

Right, absolutely.

And the number of people who've got this money in these cities is expanding.

In Jacksonville, for example, where a new club will be opening, the number of households earning more than $200,000 annually is up about 15% since just 2021.

And that's according to the U.S.

Census Bureau.

Have you been in?

Are they nice?

I mean, is it worth it?

I have not been in any of these cities.

I personally am a member of the YMCA.

That's my social club.

But I spoke with a lot of members for this story, and they really enjoy it.

They find it to be well worth their money.

Kate King covers real estate for the Wall Street Journal, private clubs in mid-sized cities in America.

Kate, thanks a lot.

I appreciate your time.

Oh, thank you.

This final note on the way out today, saw this in the Wall Street Journal this morning.

It's a fiscal year, end-of-year accounting of sorts for the federal government.

The journal points out that the government collected $195 billion in tariff income in its fiscal year 2025.

Tariffs, I am obliged to remind you for the umpteenth time, are tax increases on American consumers and American businesses.

We paid interest on the federal debt of $1.025 trillion with a T dollars, first time it has been in 10 digits, that interest amount.

And that $2 trillion that Elon Musk and his operatives said they would cut from government spending.

I mean, first of all, come on, man, you never really believed that, did you?

Also, total government spending, excluding that interest on the debt that I mentioned, actually went up $220 billion in fiscal 2025.

Our daily production team includes Livy Burdett, Andy Corbin, Nicholas Geong, Maria Hollenhorst, Sarah Leeson, Sean McHenry, and Sophia Terenzio.

I'm Kyle Risdall.

We will see you tomorrow, everybody.

This is APM.

Sometimes kids ask questions that reveal just how much adults still need to learn, like, can you explain what causes an economic bubble?

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Fear not, Million Bazillion is back with a new season to help you and your kids become pros at understanding how money shapes the answers to all those questions and more.

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